{"id":20505,"date":"2023-01-19T07:30:25","date_gmt":"2023-01-19T12:30:25","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=20505"},"modified":"2023-01-19T07:30:25","modified_gmt":"2023-01-19T12:30:25","slug":"follow-these-four-steps-before-rushing-into-a-trade","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/follow-these-four-steps-before-rushing-into-a-trade\/","title":{"rendered":"Follow These Four Steps Before Rushing Into a Trade"},"content":{"rendered":"

As a true multi-asset class trader, I could be trading stocks, bonds, commodities, or currencies during any given week.<\/p>\n

And while each of those markets are different from one another – how I approach them is the same.<\/p>\n

That’s because I only need to go through the same four steps and answer the same questions before taking a trade.<\/p>\n

This simplicity allows me to be nimble and identify the best trading opportunities…<\/p>\n

Four Questions to Ask Before Your Next Trade<\/h2>\n

Thorough analysis on each trade is vital for success. The following questions prevent me from rushing into a trade just because the market is moving…<\/p>\n

    \n
  1. \n

    What’s the overall trend? Is it up, down, or sideways?<\/p>\n<\/li>\n

  2. \n

    What’s the chart pattern? Is it a trend continuation pattern or a reversal one?<\/p>\n<\/li>\n

  3. \n

    Does the momentum in the market back up my trend and pattern analysis?<\/p>\n<\/li>\n

  4. \n

    What’s my T.E.S.T. (timeframe, entry, stop loss, and target)?<\/p>\n<\/li>\n<\/ol>\n

    I must clearly answer each question before being able to move on to the next. If I can’t answer a question, then I don’t have a great trading opportunity in front of me.<\/p>\n\n\n\n
    \n

    Free Trading Resources<\/strong><\/p>\n

    Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    How to Apply This Process to Your Trades<\/h2>\n

    Now let’s look at an example of how I put together a trade using these four steps.<\/p>\n

    Below you’ll see a coffee futures price chart. It’s a market I keep a close eye on because of how volatile it can be. Take a look…<\/p>\n

    \"Chart\"<\/div>\n

    Here’s how I would approach this chart using my four steps…<\/p>\n

      \n
    1. \n

      The trend is clearly down. Since hitting its August peak, coffee has declined by nearly 40%.<\/p>\n<\/li>\n

    2. \n

      The chart pattern I’ve spotted is a potential reversal in the making.<\/p>\n

      The Relative Strength Index (RSI) at the bottom of the chart is putting in strong signs of bullish divergence (blue line)… which happens when a market continues to trade lower, but the RSI begins to trend higher.<\/p>\n

      The RSI bottomed out in November and has started to trend higher. At the same time, coffee has steadily traded lower.<\/p>\n<\/li>\n

    3. \n

      Strong bullish momentum is needed to confirm the potential reversal pattern from step two.<\/p>\n

      That’s why I’ve marked a key level (red line) on the price chart. This key level comes in at $173.55, the recent high from December 28.<\/p>\n

      If the market can trade through this level, then it would be a very convincing sign of bullish momentum.<\/p>\n<\/li>\n

    4. \n

      Now, we’re left with answering our T.E.S.T.<\/p>\n

      Timeframe:<\/strong> This price chart is of the daily timeframe. That means that if a trade is triggered, then one could expect it to last several days or a few weeks.<\/p>\n

      Entry:<\/strong> I would use a break of the key level to trade coffee. So, a break of $173.55 to the upside would be a great entry point.<\/p>\n

      Stop Loss:<\/strong> The most recent low in the market would make for a great natural stop loss level. Right now, that would mean setting a stop loss at $142.<\/p>\n

      Target:<\/strong> I would set a target around the 200-period moving average (MA – green line). Right now, that would mean setting a target at a price level of $204.36.<\/p>\n<\/li>\n<\/ol>\n

      Always Stick to Your Trading Plan<\/h2>\n

      And there we have it. A very simple and straightforward trading plan for coffee futures.<\/p>\n

      If coffee is a bit of an obscure market for you, then that’s OK. The bottom line is that you can follow these four steps on any market you choose.<\/p>\n

      This framework has helped keep me out of trouble over the last 14 years, and I hope it will serve you just as well.<\/p>\n

      Before you rush into a next trade, remember to slow down and have a trading plan in place.<\/p>\n

      Happy trading,<\/p>\n

      Imre Gams
      Analyst, Market Minute<\/em><\/p>\n

      P.S.<\/strong> It is now more crucial than ever to have a solid trading plan in place…<\/p>\n

      Starting on January 25, a strange anomaly<\/a> is set to hit the markets. Hundreds of popular stocks could experience one-day drops of 10%, 20%, 30%, or more.<\/p>\n

      Luckily, my colleague Jeff Clark is willing to share a “crash-proof” strategy that could not only protect you from the mayhem… but also help you accelerate your retirement in just 44 days.<\/p>\n

      To learn more, click right here<\/a> for details on his special strategy session.<\/p>\n

      <\/p>\n

      Reader Mailbag<\/strong><\/h2>\n

      How has preparing with technical analysis helped you become a better trader?<\/p>\n

      Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

      <\/p>\n","protected":false},"excerpt":{"rendered":"

      This simplicity allows traders to be nimble and identify the best trading opportunities\u2026<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[76],"newsletter-type":[],"ticker":[],"class_list":["post-20505","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-imre-gams"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20505","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=20505"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/20505\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=20505"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=20505"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=20505"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=20505"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=20505"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=20505"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=20505"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}